UK gilts waver in subdued trade, no major movements likely before 2nd week of January

The UK gilts were drifting between small gains and losses in quiet Wednesday trading session ahead of long global Christmas holidays.

The yield on the benchmark 10-year gilts, which moves inversely to its price, fell 2 basis points to 1.39 percent, the super-long 40-year bond yield dipped 1-1/2 basis points to 1.86 percent and the yield on short-term 2-year bounced 1 basis point to 0.087 percent by 09:30 GMT.

According to the latest Citi/YouGov survey, UK’s inflation expectations for the short term are broadly steady at 2.4 percent whilst expectations for the longer term have risen to 3.0 percent up from 2.8 percent in November.

On Tuesday, the Federal Reserve Chair Janet Yellen commented that the United States is now seeing its strongest labour market in nearly a decade as job creation has continued at a relatively steady pace. Also added that she has seen signs of wage growth improving and that weekly earnings for younger workers are making strong gains.

Moreover, the Federal Open Market Committee increased the fed funds rate to a 0.50-0.75 percent range last Wednesday, as widely expected. The statement noted that information received since the November meeting indicates that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year.

Also, the new projections showed that the central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.

Lastly, markets will remain keen to focus on the upcoming economic data and events, highlighted by GfK consumer confidence, business investments, current account and Q3 GDP data.

Meanwhile, the FTSE 100 traded nearly flat at 7,047 by 09:40 GMT. While at 09:00 GMT, the FxWirePro's Hourly GBP Strength Index remained highly bearish at -132.78 (lower than -75 represents purely a bearish trend).